McDermott contract hangs in the balance
McDermott contract hangs in the balance
JAKARTA (JP): Construction company PT McDermott Indonesia
could lose a contract for the installation of a giant natural gas
pipeline linking west of the Natuna islands to Singapore after
the House of Representatives found irregularities in the
tendering process for the project.
Legislator HA Walid of the United Development Party (PPP) said
the special team formed by the House to probe the tendering
process had found irregularities in the bidding and that state
oil and gas Pertamina and the government should cancel the
selection of McDermott.
"The team has recommended that the government and Pertamina
disqualify McDermott," Walid told The Jakarta Post.
The 12-strong team comprising the members of the House
Commission V for industry, mines and energy decided on the case
in a meeting presided over by Walid on Thursday.
The House formed the team to end the controversy over the
appointment of McDermott -- a subsidiary of J Ray McDermott SA of
the United States -- to construct a 650-kilometer underwater
pipeline for the transportation of natural gas from the gas
fields in the Southeast China Sea to Singapore for 22 years
starting from 2001.
The gas fields are being developed by a consortium comprising
three of Pertamina's production-sharing contractors -- Conoco
Corp. of the United States, Premier Oil of Britain and Gulf
Resources of Canada.
Several legislators criticized the consortium and Pertamina
for selecting McDermott, citing its partnership with former
president Soeharto's close friend, Mohammad "Bob" Hasan, who has
an 18 percent share in McDermott Indonesia.
Pertamina and the consortium maintained that McDermott had won
the project in an open, competitive bidding.
After studying the bidding for several weeks, however, the
team found that the bidding was "not transparent and in violation
of the existing regulation," said Walid.
He said the team found evidence that Pertamina was under
political pressure to directly appoint McDermott for the project
"before and during the bidding process" prior to the downfall of
Soeharto in May last year.
"Head of Pertamina's foreign contractors supervision body
(BPPKA) Gatot K Wiroyudo informed the team about the pressure in
a recent hearing," Walid said.
McDermott had won the project with the lowest bid of US$335.8
million, beating out other bidders, ETPM of France, Saipem of
Italy and Nippon Steel of Japan.
But the team dismissed the contract signed by McDermott and
the consortium as imperfect over the fact that it did not
explicitly state whether the cost proposed by McDermott was the
maximum payable by the consortium and Pertamina to McDermott.
"As such, McDermott is not forbidden under the contract to ask
for the reimbursement of additional costs in the future," Walid
said.
The team also faulted the contract because Pertamina and the
consortium did not require McDermott to provide a bank guarantee
in case the contractor failed to complete the job properly.
The team found evidence indicating McDermott had benefited
from "insider information" to cut field survey costs, allowing it
to propose a much lower bid than its competitors.
Walid said the team was also concerned with the fact that
Hasan had shares in the company but it asserted that the
partnership was not the main reason behind the team's demand for
the cancellation of McDermott's contract.
"The team will still demand the cancellation of the contract
even if Hasan has no longer any shares in the company," he said.
Walid said the team's recommendation should be approved by the
commission before being submitted to Pertamina and the
government.
"The commission can't discuss the recommendation right now due
to a recess period. But the commission's head had approved it
personally," Walid said.
Walid denied allegations that the cancellation of the contract
would affect the country's investment climate.
"On the contrary, foreign investors will praise us for our
determination to create a clean business environment," Walid
said. (jsk)